CHICAGO--(BUSINESS WIRE)--MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial
Bank, N.A., today announced 2014 third quarter net income of $6.9
million compared to $23.1 million last quarter and $24.4 million in the
third quarter a year ago. Net income available to common stockholders
was $4.9 million for the third quarter of 2014.

Consideration paid was $639.8 million, including $519.3 million in
common stock and $120.5 million in cash.

We issued 19.6 million shares of common stock as a result of the
acquisition.

Each share of Taylor Capital’s Perpetual Non-Cumulative Preferred
Stock, Series A was converted into one share of our Perpetual
Non-Cumulative Preferred Stock, Series A with substantially identical
terms.

The results of operations of Taylor Capital have been included in our
results of operations for the 44 days since the date of acquisition.

We have made significant progress toward achieving targeted cost
savings.

We successfully converted Taylor Capital's clients to MB data
processing systems and products in September 2014.

Operating Earnings:

Operating earnings, which we define as earnings excluding non-core
items, were $35.7 million for the third quarter of 2014 compared to
$23.5 million last quarter and $26.0 million in the third quarter a
year ago. A table reconciling net income, as reported to operating
earnings is set forth below and in the “Non-GAAP Financial
Information” section.

Nine Months Ended

September 30,

3Q14

2Q14

3Q13

2014

2013

(dollars in thousands)

Net income, as reported

$

6,901

$

23,106

$

24,400

$

49,976

$

74,599

Less non-core items:

Net (loss) gain on investment securities

(3,246

)

(87

)

1

(3,016

)

14

Net loss on sale of other assets

(7

)

(24

)

—

(24

)

—

Gain on extinguishment of debt

1,895

—

—

1,895

—

Merger related expenses

(27,161

)

(488

)

(1,759

)

(28,329

)

(1,759

)

Loss on low-income housing investment

—

(96

)

—

(2,124

)

—

Contingent consideration expense - Celtic acquisition

(10,600

)

—

—

(10,600

)

—

Total non-core items

(39,119

)

(695

)

(1,758

)

(42,198

)

(1,745

)

Income tax expense on non-core items

(10,295

)

(266

)

(174

)

(11,416

)

(168

)

Non-core items, net of tax

(28,824

)

(429

)

(1,584

)

(30,782

)

(1,577

)

Operating earnings

$

35,725

$

23,535

$

25,984

$

80,758

$

76,176

In December 2012, we acquired Celtic Leasing Corp. ("Celtic"). The
purchase consideration paid to Celtic's selling shareholders included
the right to receive certain contingent payments based on the
realization of residuals owned by Celtic on the transaction closing
date. Given Celtic's stronger than expected lease residual performance
subsequent to the acquisition, we have increased the fair value of the
residual based contingent consideration by $10.6 million.

Net Interest Income Increased $27.5 million, or 40.5%, from the Prior
Quarter and $26.7 million, or 38.8%, from the Third Quarter of 2013:

The increase in net interest income is primarily due to the Taylor
Capital merger. Net interest income in the third quarter of 2014
included interest income of $6.2 million resulting from the accretion
of the purchase accounting discount recorded on the loans acquired in
the Taylor Capital merger ($5.9 million for non-purchased
credit-impaired loans and $282 thousand for purchase credit-impaired
loans).

Our fully tax equivalent net interest margin was 3.78% for the third
quarter of 2014 compared to 3.53% for the prior quarter and 3.66% for
the third quarter of 2013. Excluding the purchase accounting loan
discount accretion ($6.2 million)on Taylor Capital loans, the
Company's net interest margin on a fully tax equivalent basis would
have been 3.54% for the third quarter of 2014.

Core Non-interest Income Increased $22.8 million, or 57.6%, from the
Prior Quarter and $25.2 million, or 67.8%, from the Third Quarter of
2013:

Leasing revenues increased 19.3% from $14.9 million in second quarter
of 2014 and 25.9% from $14.1 million in the third quarter of 2013 to
$17.7 million in the third quarter of 2014 primarily due to higher
fees and promotional revenue from the sale of third-party equipment
maintenance contracts.

Mortgage banking revenue increased by $16.6 million due to the Taylor
Capital merger.

Commercial deposit and treasury management fees increased 31.5% from
$7.1 million in the second quarter of 2014 and 47.7% from $6.3 million
in the third quarter of 2013 to $9.3 million in the third quarter of
2014 as a result of the Taylor Capital merger in addition to robust
new customer activity prior to the merger.

Core non-interest income was 38.23% of revenues in the third quarter
of 2014 compared to 35.22% in the prior quarter.

Core Non-interest Expense Increased $27.4 million, or 35.6%, from the
Prior Quarter and $30.4 million, or 41.1%, from the Third Quarter of
2013:

The increase in the Company’s core non-interest expense from the prior
quarter and third quarter of 2013 was primarily driven by the Taylor
Capital merger.

The efficiency ratio for the third quarter of 2014 decreased to 63.46%
from 67.68% in the prior quarter and 65.81% in the third quarter of
2013.

Net non-interest expense to average assets decreased to 1.35% in the
third quarter of 2014 from 1.55% and 1.56% in the prior quarter and
the third quarter of 2013, respectively.

Credit Quality Metrics:

We recorded a provision for credit losses of $3.1 million in the third
quarter compared to a negative provision for credit losses of $2.0
million in the prior quarter and a negative provision for credit
losses of $3.3 million in the third quarter of 2013.

The third quarter 2014 provision for credit losses included a negative
provision for credit losses of $1.6 million for the legacy MB
Financial portfolio and a positive provision of $4.7 million related
to the acquired Taylor Capital portfolio for loan renewals subsequent
to the acquisition date and the establishment of a corresponding
general reserve for Taylor Capital loans in excess of the loan
discount. We anticipate recording a provision related to the acquired
portfolio in future quarters related to renewing Taylor loans which
will largely offset the accretion from non-purchase credit impaired
loans.

Non-performing loans decreased by $10.5 million from June 30, 2014,
and potential problem loans decreased by $11.8 million from June 30,
2014.

RESULTS OF OPERATIONS

Third Quarter Results

Net Interest Income

Net interest income and net interest margin on a fully tax equivalent
basis for the three and nine months ended September 30, 2014 were
impacted by the Taylor Capital merger. Net interest income on a fully
tax equivalent basis increased $28.0 million from the second quarter of
2014 to $101.7 million in the third quarter of 2014. The Company's net
interest margin on a fully tax equivalent basis for the third quarter of
2014 increased 25 basis points to 3.78% compared to the second quarter
of 2014.

Net interest income on a fully tax equivalent basis increased $26.9
million from the third quarter of 2013. Our net interest margin on a
fully tax equivalent basis for the third quarter of 2014 increased 12
basis points compared to the third quarter of 2013.

Net interest income on a fully tax equivalent basis for the nine months
ended September 30, 2014 increased $27.2 million from the nine months
ended September 30, 2013. Our net interest margin on a fully tax
equivalent basis for the nine months ended September 30, 2014 increased
four basis points to 3.66% compared to the nine months ended
September 30, 2013.

As noted earlier, on August 18, 2014, we completed the Taylor Capital
merger. The acquired assets and assumed liabilities were recorded at
fair value as required under the acquisition method of accounting. Fair
value adjustments are amortized or accreted into net interest income
over the remaining terms of the interest earning assets and interest
bearing liabilities. The fair value adjustment on acquired loans had the
most significant impact on net interest margin. Excluding the purchase
accounting loan discount accretion on Taylor Capital loans, our net
interest margin on a fully tax equivalent basis would have been 3.54%
and 3.57% for the three and nine months ended September 30, 2014,
respectively, compared to 3.66% and 3.62% for the three and nine months
ended September 30, 2013.

In September 2014, we repositioned our balance sheet and shortened the
duration of our investment securities portfolio to pre-merger levels by
selling $468.7 million in investment securities and utilizing the
proceeds from the sales to reduce short term FHLB advances. A $3.2
million loss was recognized on investment securities in the third
quarter of 2014 as a result of this balance sheet repositioning.

In September 2014, we also redeemed all of the outstanding 9.75% junior
subordinated notes relating to the trust preferred securities of TAYC
Capital Trust I. These notes were originally issued by Taylor Capital
and were assumed by us in connection with the merger. The TAYC Capital
Trust I trust preferred securities, which had an aggregate outstanding
liquidation amount of $45.4 million, were automatically redeemed as a
result of our redemption of the junior subordinated notes. A $1.9
million gain on the early extinguishment of the trust preferred
securities was recorded in other operating income in the third quarter
of 2014, which represented the difference between the fair market value
of these securities on August 18, 2014 and their aggregate liquidation
amount at redemption.

Non-interest Income and Expense

We acquired Taylor Capital's mortgage operations through the merger. As
there can be fluctuations in the mortgage operations from quarter to
quarter based on the overall level of interest rates, we are presenting
non-interest income and expense both including and excluding mortgage
banking.

Non-interest Income (in thousands):

Nine Months Ended

September 30,

3Q14

2Q14

3Q13

2014

2013

Excluding

Excluding

Mortgage

Mortgage

Mortgage

Mortgage

Banking

Banking

Total

Banking

Banking

Total

Core non-interest income:

Key fee initiatives:

Lease financing, net

$

17,719

$

—

$

17,719

$

14,853

$

14,070

$

45,768

$

—

$

45,768

$

45,435

Mortgage banking revenue

—

16,823

16,823

187

177

—

17,069

17,069

1,322

Commercial deposit and treasury management fees

9,345

—

9,345

7,106

6,327

23,595

—

23,595

18,322

Trust and asset management fees

5,712

—

5,712

5,405

4,799

16,324

—

16,324

14,167

Card fees

3,836

—

3,836

3,304

2,745

9,841

—

9,841

8,175

Capital markets and international banking service fees

1,472

—

1,472

1,360

972

3,810

—

3,810

2,719

Total key fee initiatives

38,084

16,823

54,907

32,215

29,090

99,338

17,069

116,407

90,140

Consumer and other deposit service fees

3,362

—

3,362

3,156

3,648

9,453

—

9,453

10,487

Brokerage fees

1,145

—

1,145

1,356

1,289

3,826

—

3,826

3,680

Loan service fees

1,069

—

1,069

916

1,427

2,950

—

2,950

4,349

Increase in cash surrender value of life insurance

855

—

855

834

851

2,516

—

2,516

2,537

Other operating income

1,145

—

1,145

1,162

942

3,106

—

3,106

3,179

Total core non-interest income

45,660

16,823

62,483

39,639

37,247

121,189

17,069

138,258

114,372

Non-core non-interest income:

Net (loss) gain on investment securities

(3,246

)

—

(3,246

)

(87

)

1

(3,016

)

—

(3,016

)

14

Net loss on sale of other assets

(7

)

—

(7

)

(24

)

—

(24

)

—

(24

)

—

Gain on extinguishment of debt

1,895

—

1,895

—

—

1,895

—

1,895

—

(Decrease) increase in market value of assets held in trust for
deferred compensation (1)

(38

)

—

(38

)

400

459

514

—

514

963

Total non-core non-interest income

(1,396

)

—

(1,396

)

289

460

(631

)

—

(631

)

977

Total non-interest income

$

44,264

$

16,823

$

61,087

$

39,928

$

37,707

$

120,558

$

17,069

$

137,627

$

115,349

(1) Resides in other operating income in the
consolidated statements of income.

Core non-interest income for the third quarter of 2014 increased 57.6%
to $62.5 million from the second quarter of 2014. Excluding mortgage
banking, core non-interest income increased by 15.2%.

Leasing revenues increased due to higher fees and promotional revenue
from the sale of third-party equipment maintenance contracts. The
Company acquired another leasing subsidiary, Cole Taylor Equipment
Finance, through the Taylor Capital merger. Cole Taylor Equipment
Finance contributed approximately $404 thousand to leasing revenues in
the third quarter of 2014 since the date of acquisition.

Commercial deposit and treasury management fees increased due to the
increased customer base as a result of the Taylor Capital merger and
new customer activity prior to the merger.

Card fees increased due to the full quarter impact of a new payroll
prepaid card program that started in the second quarter of 2014.

Trust and asset management fees increased due to the addition of new
customers and the impact of higher equity values.

Core non-interest income for the nine months ended September 30, 2014
increased 20.9% to $138.3 million from the nine months ended September
30, 2013. Excluding mortgage banking, core non-interest income increased
by 6.0%.

Commercial deposit and treasury management fees increased due to
robust new customer activity as well as the increased customer base as
a result of the Taylor Capital merger.

Trust and asset management fees increased due to the addition of new
customers and the impact of higher equity values.

Card fees increased due to a new payroll prepaid card program as well
as higher credit card fees.

Capital markets and international banking services fees increased due
to higher M&A advisory and syndication fees.

Consumer and other deposit service fees decreased due to lower demand
deposit service and NSF and overdraft charges.

Non-core non-interest income for the quarter and nine months ended
September 30, 2014 was impacted by the net loss on investment securities
and the gain on extinguishment of debt as a result of the balance sheet
repositioning that occurred in September 2014.

(Decrease) increase in market value of assets held in trust for
deferred compensation (D)

(38

)

—

(38

)

400

459

514

—

514

963

Total non-core non-interest expense

37,723

—

37,723

984

2,218

41,567

—

41,567

2,722

Total non-interest expense

$

127,894

$

14,307

$

142,201

$

78,030

$

76,265

$

281,971

$

14,307

$

296,278

$

217,947

(1) Letters denote the corresponding line items where
these non-core non-interest expense items reside in the
consolidated statements of income as follows: A – Net (gain) loss
recognized on other real estate owned and other expense, B –
Salaries and employee benefits, occupancy and equipment expense,
computer services and telecommunication expense, advertising and
marketing expense, professional and legal expense and other
operating expenses, C – Other operating expenses, D – Salaries and
employee benefits.

Core non-interest expense increased by $27.4 million, or 35.6%, from the
second quarter of 2014 to $104.5 million for the third quarter of 2014.
Excluding mortgage banking, core non-interest expense increased by $13.1
million, or 17.0%.

Salaries and employee benefits increased primarily due to increased
staff from the Taylor Capital merger.

Occupancy and equipment expense increased due to the additional
offices acquired in the Taylor Capital merger.

Computer services and telecommunication expenses increased primarily
due to an increase in spending on IT security, data warehouse and
investments in our key fee initiatives, as well as due to the Taylor
Capital merger.

Core non-interest expense increased by $39.5 million, or 18.3%, from the
nine months ended September 30, 2013 to $254.7 million for the nine
months ended September 30, 2014. Excluding mortgage banking, core
non-interest expense increased by $25.2 million, or 11.7%.

Other operating expense increased primarily as a result of an increase
in filing and other loan expense, higher FDIC assessments due to our
larger balance sheet and higher currency delivery expenses related to
new treasury management accounts.

Computer services and telecommunication expenses increased due
primarily to an increase in spending on IT security, data warehouse,
investments in our key fee initiatives, as well as higher transaction
volumes in the leasing, treasury management and card areas. The
increase was also due to increased telecommunication expense related
to transitioning to a new provider.

Non-core non-interest expense was primarily impacted by the merger
related expenses for the Taylor Capital merger and the contingent
consideration expense related to our acquisition of Celtic Leasing Corp.

The following table presents the detail of the merger related expenses
(dollars in thousands):

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Merger related expenses:

Salaries and employee benefits

$

14,259

$

—

$

104

$

—

$

—

$

14,363

$

—

Occupancy and equipment expense

428

14

—

—

—

442

—

Computer services and telecommunication expense

5,312

170

13

—

—

5,495

—

Advertising and marketing expense

262

108

90

4

—

460

—

Professional and legal expense

6,363

79

410

717

1,694

6,852

1,694

Other operating expenses

537

117

63

3

65

717

65

Total merger related expenses

$

27,161

$

488

$

680

$

724

$

1,759

$

28,329

$

1,759

We expect to incur additional merger related expenses in the next few
quarters primarily in the area of occupancy and equipment expense.

Income Tax Expense

Income tax expense was $4.5 million for the third quarter of 2014,
compared to $8.8 million for the second quarter of 2014, a decrease of
49.1%. The reduction in income tax expense is primarily due to the 64.3%
decrease in income before taxes from $31.9 million in the second quarter
of 2014 to $11.4 million in the third quarter of 2014, partially offset
by certain costs incurred in the third quarter of 2014 that were not
currently deductible for tax purposes. These include the contingent
consideration expense related to the Celtic acquisition and certain
legal and professional fees associated with the Taylor Capital merger.

Operating Segments

The Company's operations consist of three reportable operating segments:
banking, leasing and mortgage banking. The banking segment generates its
revenues primarily from its lending and deposit gathering activities.
The leasing segment generates its revenues through lease originations
and related services offered through the Company's leasing subsidiaries:
LaSalle Systems Leasing, Inc., Celtic Leasing Corp. and Cole Taylor
Equipment Finance. The mortgage banking segment originates residential
mortgage loans for sale to investors through its retail and third party
channels. The mortgage banking segment also services residential
mortgage loans owned by investors and the Company. The segment
information incorporates the result of Taylor Capital for 44 days
subsequent to the merger date.

(1) Acquired loans refer to the September 30, 2014
balance for loans acquired in the Taylor Capital merger.

(2) Covered loans refer to loans we acquired in
FDIC-assisted transactions that have been subject to loss-sharing
agreements with the FDIC.

Legacy gross loans excluding covered loans increased $25.3 million from
$5.4 billion at June 30, 2014. This increase was primarily due to growth
in the commercial loans category.

ASSET QUALITY

The following table presents a summary of criticized assets (excluding
loans held for sale, purchased credit-impaired loans and other real
estate owned acquired as part of our FDIC-assisted transactions) as of
the dates indicated (dollars in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Non-performing loans:

Non-accrual loans (1)

$

97,580

$

108,414

$

118,023

$

106,115

$

102,042

Loans 90 days or more past due, still accruing interest

2,681

2,363

747

446

410

Total non-performing loans

100,261

110,777

118,770

106,561

102,452

Other real estate owned

19,179

20,306

20,928

23,289

31,356

Repossessed assets

126

73

772

840

861

Total non-performing assets

$

119,566

$

131,156

$

140,470

$

130,690

$

134,669

Potential problem loans (2)

$

51,690

$

63,477

$

68,785

$

79,589

$

96,410

Total allowance for loan losses

$

102,810

$

100,910

$

106,752

$

111,746

$

118,031

Accruing restructured loans (3)

18,277

26,793

25,797

29,430

29,911

Total non-performing loans to total loans

1.12

%

1.99

%

2.13

%

1.87

%

1.83

%

Total non-performing assets to total assets

0.82

1.34

1.49

1.36

1.45

Allowance for loan losses to non-performing loans

102.54

91.09

89.88

104.87

115.21

(1)

Includes $22.4 million, $14.5 million, $15.6 million, $25.0 million
and $22.3 million of restructured loans on non-accrual status at
September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013
and September 30, 2013, respectively.

(2)

We define potential problem loans as loans rated substandard that
do not meet the definition of a non-performing loan. Potential
problem loans carry a higher probability of default and require
additional attention by management.

(3)

Accruing restructured loans consist primarily of residential real
estate and home equity loans that have been modified and are
performing in accordance with those modified terms as of the dates
indicated.

The following table presents data related to non-performing loans by
category (excluding loans held for sale and credit-impaired loans that
were acquired as part of our FDIC-assisted transactions and Taylor
Capital merger) as of the dates indicated (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Commercial and lease

$

22,985

$

36,807

$

42,532

$

22,348

$

22,293

Commercial real estate

42,832

48,751

49,541

58,292

54,276

Construction real estate

337

337

782

475

496

Consumer related

34,107

24,882

25,915

25,446

25,387

Total non-performing loans

$

100,261

$

110,777

$

118,770

$

106,561

$

102,452

The increase in consumer non-performing loans relates to a group of
restructured loans that are less than 90 days past due that are now
reported as non-performing.

The following table represents a summary of other real estate owned
(excluding other real estate owned related to assets acquired in
FDIC-assisted transactions) as of the dates indicated (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Balance at the beginning of quarter

$

20,306

$

20,928

$

23,289

$

31,356

$

32,993

Transfers in at fair value less estimated costs to sell

221

112

539

104

1,846

Acquired from business combination

5,082

—

—

—

—

Capitalized other real estate owned costs

—

—

—

21

45

Fair value adjustments

(2,083

)

(286

)

(140

)

(176

)

(741

)

Net gains (losses) on sales of other real estate owned

735

82

18

1,007

(13

)

Cash received upon disposition

(5,082

)

(530

)

(2,778

)

(9,023

)

(2,774

)

Balance at the end of quarter

$

19,179

$

20,306

$

20,928

$

23,289

$

31,356

Below is a reconciliation of the activity in our allowance for credit
and loan losses for the periods indicated (dollars in thousands):

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Allowance for credit losses, balance at the beginning of period

$

103,905

$

108,395

$

113,462

$

119,725

$

125,497

$

113,462

$

128,279

Allowance for unfunded credit commitments acquired through business
combination

Ratio of allowance for loan losses to total loans, excluding loans
held for sale

1.14

%

1.82

%

1.92

%

1.96

%

2.11

%

1.14

%

2.11

%

Ratio of allowance for loan losses to total legacy loans plus Taylor
renewed loans, excluding loans held for sale (1)

1.83

1.82

1.92

1.96

2.11

1.83

2.11

Net loan charge-offs to average loans, excluding loans held for sale
(annualized)

0.04

0.18

0.45

0.23

0.18

0.21

0.14

(1) Taylor renewed loans totaled $92.6 million at
September 30, 2014.

The following table presents the three elements of the Company's
allowance for loan losses (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Commercial related loans:

General reserve

$

76,604

$

70,855

$

75,695

$

78,270

$

87,112

Specific reserve

5,802

10,270

11,325

12,834

12,378

Consumer related reserve

20,404

19,785

19,732

20,642

18,541

Total allowance for loan losses

$

102,810

$

100,910

$

106,752

$

111,746

$

118,031

Specific reserves decreased during the quarter due to an improvement in
credit quality on impaired loans.

Although management believes that adequate loan loss allowances have
been established, actual losses are dependent upon future events and, as
such, further additions to the level of loan loss allowances may become
necessary.

Purchased loans acquired in a business combination are recorded at
estimated fair value on their purchase date without a carryover of the
related allowance for loan losses. These acquired loans are segregated
into three types: pass rated loans with no discount attributable to
credit quality, non-impaired loans with a discount attributable at least
in part to credit quality and impaired loans with evidence of
significant credit deterioration.

Pass rated loans (typically performing loans) are accounted for in
accordance with ASC 310-20 "Nonrefundable Fees and Other Costs" as
these loans do not have evidence of credit deterioration since
origination.

Non-impaired loans (typically performing substandard loans) are
accounted for in accordance with ASC 310-30 if they display at least
some level of credit deterioration since origination.

Impaired loans (typically substandard loans on non-accrual status) are
accounted for in accordance with ASC 310-30 as they display
significant credit deterioration since origination.

For pass rated loans (non-purchased credit impaired loans), the
difference between the estimated fair value of the loans and the
principal outstanding is accreted over the remaining life of the loans.
We anticipate recording a provision for the acquired portfolio in future
quarters related to renewing Taylor loans which will largely offset the
accretion from the pass rated loans.

In accordance with ASC 310-30, for both purchased non-impaired loans and
purchased impaired loans ("PCI loans"), the difference between
contractually required payments at acquisition and the cash flows
expected to be collected is referred to as the non-accretable
difference. Further, any excess of cash flows expected at acquisition
over the estimated fair value is referred to as the accretable yield and
is recognized into interest income over the remaining life of the loan
when there is a reasonable expectation about the amount and timing of
such cash flows.

Changes in the purchase accounting discount for loans acquired in the
Taylor Capital merger were as follows for the three months ended
September 30, 2014 (in thousands):

Non-

Accretable

Accretable

Accretable

Discount -

Discount -

Discount -

Non-PCI

PCI Loans

PCI Loans

Loans

Total

Balance at beginning of period

$

—

$

—

$

—

$

—

Purchases

30,042

3,252

77,186

110,480

Charge-offs

(1,062

)

—

—

(1,062

)

Accretion

—

(282

)

(5,892

)

(6,174

)

Balance at end of period

$

28,980

$

2,970

$

71,294

$

103,244

INVESTMENT SECURITIES

The following table sets forth, by type, the fair value and amortized
cost of our investment securities, excluding FHLB and FRB stock, as well
as the unrealized gain of our investment securities available for sale
(in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Securities available for sale:

Fair value

Government sponsored agencies and enterprises

$

65,829

$

51,727

$

51,836

$

52,068

$

52,527

States and political subdivisions

409,033

19,498

19,350

19,143

19,312

Mortgage-backed securities

1,006,102

797,783

726,439

754,174

744,722

Corporate bonds

267,239

275,529

273,853

283,070

263,021

Equity securities

10,447

10,421

10,572

10,457

10,541

Total fair value

$

1,758,650

$

1,154,958

$

1,082,050

$

1,118,912

$

1,090,123

Amortized cost

Government sponsored agencies and enterprises

$

64,809

$

50,096

$

50,291

$

50,486

$

50,678

States and political subdivisions

391,900

19,228

19,285

19,398

19,461

Mortgage-backed securities

999,630

786,496

717,548

747,306

736,070

Corporate bonds

265,720

271,351

272,490

284,083

265,293

Equity securities

10,470

10,414

10,703

10,649

10,574

Total amortized cost

$

1,732,529

$

1,137,585

$

1,070,317

$

1,111,922

$

1,082,076

Unrealized gain, net

Government sponsored agencies and enterprises

$

1,020

$

1,631

$

1,545

$

1,582

$

1,849

States and political subdivisions

17,133

270

65

(255

)

(149

)

Mortgage-backed securities

6,472

11,287

8,891

6,868

8,652

Corporate bonds

1,519

4,178

1,363

(1,013

)

(2,272

)

Equity securities

(23

)

7

(131

)

(192

)

(33

)

Total unrealized gain, net

$

26,121

$

17,373

$

11,733

$

6,990

$

8,047

Securities held to maturity, at amortized cost:

States and political subdivisions

$

760,674

$

993,937

$

940,610

$

932,955

$

941,273

Mortgage-backed securities

244,675

247,455

248,082

249,578

252,271

Total amortized cost

$

1,005,349

$

1,241,392

$

1,188,692

$

1,182,533

$

1,193,544

During the third quarter of 2014, the Company repositioned its balance
sheet subsequent to the Taylor Capital merger and sold certain
longer-term and lower-coupon investment securities with an approximate
carrying amount of $468.7 million. These investment security sales
shortened the overall duration of the investment securities portfolio to
pre-merger levels. Also as a part of the balance sheet repositioning,
securities of states and political subdivisions with an approximate fair
value of $291.2 million were transferred from held to maturity to
available for sale during the third quarter of 2014. As a result of the
repositioning, we recognized a net loss of $3.2 million.

DEPOSIT MIX

The following table shows the composition of deposits based on period
end balances as of the dates indicated (dollars in thousands):

9/30/2014

6/30/2014

9/30/2013

% of

% of

% of

Legacy

Acquired (1)

Total

Total

Amount

Total

Amount

Total

Low cost deposits:

Noninterest bearing deposits

$

2,658,102

$

1,149,452

$

3,807,554

34

%

$

2,605,367

34

%

$

2,269,367

31

%

Money market and NOW accounts

2,884,296

1,312,870

4,197,166

37

2,932,089

38

2,680,127

37

Savings accounts

892,183

39,802

931,985

8

872,324

11

843,671

12

Total low cost deposits

6,434,581

2,502,124

8,936,705

79

6,409,780

83

5,793,165

80

Certificates of deposit:

Certificates of deposit

1,114,292

531,708

1,646,000

15

1,137,262

14

1,266,989

17

Brokered deposit accounts

189,135

466,708

655,843

6

216,022

3

238,532

3

Total certificates of deposit

1,303,427

998,416

2,301,843

21

1,353,284

17

1,505,521

20

Total deposits

$

7,738,008

$

3,500,540

$

11,238,548

100

%

$

7,763,064

100

%

$

7,298,686

100

%

(1) Acquired deposits refer to the September 30, 2014
balance for deposits acquired in the Taylor Capital transaction.

Total legacy deposits decreased $25.1 million from $7.8 billion at June
30, 2014 primarily due to the decrease in certificates of deposit.
Legacy low cost deposits increased by $24.8 million from June 30, 2014.
Shortly after the acquisition the rates paid on the Taylor Capital
deposit products, primarily affecting money markets and certificates of
deposit, were reduced to align with the Company’s current rate
offerings. We expect to see a decline in balances from rate sensitive
customers over the next few quarters.

CAPITAL

Tangible book value per common share decreased to $15.36 at September
30, 2014 compared to $15.83 a year ago and $16.81 last quarter.

When used in this press release and in reports filed with or furnished
to the Securities and Exchange Commission, in other press releases or
other public stockholder communications, or in oral statements made with
the approval of an authorized executive officer, the words or phrases
“believe,” “will,” “should,” “will likely result,” “are expected to,”
“will continue” “is anticipated,” “estimate,” “project,” “plans,” or
similar expressions are intended to identify “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. You are cautioned not to place undue reliance on any
forward-looking statements, which speak only as of the date made. These
statements may relate to our future financial performance, strategic
plans or objectives, revenues or earnings projections, or other
financial items. By their nature, these statements are subject to
numerous uncertainties that could cause actual results to differ
materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially
from the results anticipated or projected include, but are not limited
to, the following: (1) expected revenues, cost savings, synergies and
other benefits from the recently completed MB Financial-Taylor Capital
merger and our other merger and acquisition activities might not be
realized within the anticipated time frames or at all, and costs or
difficulties relating to integration matters, including but not limited
to customer and employee retention, might be greater than expected; (2)
the possibility that the expected benefits of the other acquisition
transactions we previously completed will not be realized; (3) the
credit risks of lending activities, including changes in the level and
direction of loan delinquencies and write-offs and changes in estimates
of the adequacy of the allowance for loan losses, which could
necessitate additional provisions for loan losses, resulting both from
loans we originate and loans we acquire from other financial
institutions; (4) results of examinations by the Office of Comptroller
of Currency, the Federal Reserve Board, the Consumer Financial
Protection Bureau and other regulatory authorities, including the
possibility that any such regulatory authority may, among other things,
require us to increase our allowance for loan losses or write-down
assets; (5) competitive pressures among depository institutions; (6)
interest rate movements and their impact on customer behavior and net
interest margin; (7) the possibility that our mortgage banking business
may increase volatility in our revenues and earnings and the possibility
that the profitability of our mortgage banking business could be
significantly reduced if we are unable to originate and sell mortgage
loans at profitable margins; (8) the impact of repricing and
competitors’ pricing initiatives on loan and deposit products; (9)
fluctuations in real estate values; (10) the ability to adapt
successfully to technological changes to meet customers’ needs and
developments in the market-place; (11) our ability to realize the
residual values of our direct finance, leveraged, and operating leases;
(12) our ability to access cost-effective funding; (13) changes in
financial markets; (14) changes in economic conditions in general and in
the Chicago metropolitan area in particular; (15) the costs, effects and
outcomes of litigation; (16) new legislation or regulatory changes,
including but not limited to the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and regulations
adopted thereunder, changes in capital requirements pursuant to the
Dodd-Frank Act and the implementation of the Basel III capital
standards, other governmental initiatives affecting the financial
services industry and changes in federal and/or state tax laws or
interpretations thereof by taxing authorities; (17) changes in
accounting principles, policies or guidelines; (18) our future
acquisitions of other depository institutions or lines of business; and
(19) future goodwill impairment due to changes in our business, changes
in market conditions, or other factors.

We do not undertake any obligation to update any forward-looking
statement to reflect circumstances or events that occur after the date
on which the forward-looking statement is made.

TABLES TO FOLLOW

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

As of the dates indicated

(In thousands)

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

ASSETS

Cash and due from banks

$

267,405

$

294,475

$

268,803

$

205,193

$

215,017

Interest earning deposits with banks

179,391

466,820

244,819

268,266

41,700

Total cash and cash equivalents

446,796

761,295

513,622

473,459

256,717

Federal funds sold

—

10,000

7,500

42,950

47,500

Investment securities:

Securities available for sale, at fair value

1,758,650

1,154,958

1,082,050

1,118,912

1,090,123

Securities held to maturity, at amortized cost

1,005,349

1,241,392

1,188,692

1,182,533

1,193,544

Non-marketable securities - FHLB and FRB Stock

75,569

51,432

51,432

51,417

50,870

Total investment securities

2,839,568

2,447,782

2,322,174

2,352,862

2,334,537

Loans held for sale

553,627

1,219

802

629

1,120

Loans:

Total loans, excluding purchased credit impaired and covered loans

8,714,915

5,421,758

5,394,638

5,476,831

5,313,235

Purchased credit impaired including covered loans

268,102

134,966

173,677

235,720

273,497

Total loans

8,983,017

5,556,724

5,568,315

5,712,551

5,586,732

Less: Allowance for loan losses

102,810

100,910

106,752

111,746

118,031

Net loans

8,880,207

5,455,814

5,461,563

5,600,805

5,468,701

Lease investments, net

137,120

127,194

122,589

131,089

112,491

Premises and equipment, net

244,314

224,245

221,711

221,065

220,574

Cash surrender value of life insurance

132,697

131,842

131,008

130,181

129,332

Goodwill

698,946

423,369

423,369

423,369

423,369

Other intangibles

44,544

21,014

22,188

23,428

24,917

Mortgage servicing rights, at fair value

249,376

344

378

413

430

Other real estate owned, net

19,179

20,306

20,928

23,289

31,356

Other real estate owned related to FDIC transactions

22,028

15,349

22,682

20,472

24,792

FDIC indemnification asset

2,205

4,607

8,055

11,675

11,074

Other assets

235,436

174,311

158,734

185,741

170,708

Total assets

$

14,506,043

$

9,818,691

$

9,437,303

$

9,641,427

$

9,257,618

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Deposits:

Noninterest bearing

$

3,807,554

$

2,605,367

$

2,435,868

$

2,375,863

$

2,269,367

Interest bearing

7,430,994

5,157,697

5,049,879

5,005,396

5,029,319

Total deposits

11,238,548

7,763,064

7,485,747

7,381,259

7,298,686

Short-term borrowings

667,160

229,809

189,872

493,389

240,600

Long-term borrowings

77,269

71,473

65,664

62,159

62,428

Junior subordinated notes issued to capital trusts

185,681

152,065

152,065

152,065

152,065

Accrued expenses and other liabilities

346,017

236,964

200,175

225,873

194,371

Total liabilities

12,514,675

8,453,375

8,093,523

8,314,745

7,948,150

Stockholders' Equity

Preferred stock

115,280

—

—

—

—

Common stock

751

553

553

551

551

Additional paid-in capital

1,256,050

742,824

740,245

738,053

736,294

Retained earnings

606,097

611,741

595,301

581,998

564,779

Accumulated other comprehensive income

18,431

13,034

10,362

8,383

9,918

Treasury stock

(6,692

)

(4,295

)

(4,132

)

(3,747

)

(3,525

)

Controlling interest stockholders' equity

1,989,917

1,363,857

1,342,329

1,325,238

1,308,017

Noncontrolling interest

1,451

1,459

1,451

1,444

1,451

Total stockholders' equity

1,991,368

1,365,316

1,343,780

1,326,682

1,309,468

Total liabilities and stockholders' equity

$

14,506,043

$

9,818,691

$

9,437,303

$

9,641,427

$

9,257,618

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data) (Unaudited)

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Interest income:

Loans

$

82,167

$

55,905

$

56,244

$

58,053

$

60,115

$

194,316

$

180,489

Investment securities:

Taxable

11,028

8,794

8,146

7,334

6,330

27,968

18,749

Nontaxable

9,041

8,285

8,067

8,166

8,175

25,393

24,399

Federal funds sold and other interest earning accounts

225

281

118

276

200

624

429

Total interest income

102,461

73,265

72,575

73,829

74,820

248,301

224,066

Interest expense:

Deposits

4,615

3,754

3,769

3,966

4,433

12,138

15,274

Borrowings

2,234

1,439

1,478

1,600

1,479

5,151

4,719

Total interest expense

6,849

5,193

5,247

5,566

5,912

17,289

19,993

Net interest income

95,612

68,072

67,328

68,263

68,908

231,012

204,073

Provision for credit losses

3,109

(1,950

)

1,150

(3,000

)

(3,304

)

2,309

(2,804

)

Net interest income after provision for credit losses

92,503

70,022

66,178

71,263

72,212

228,703

206,877

Non-interest income:

Lease financing, net

17,719

14,853

13,196

15,808

14,070

45,768

45,435

Mortgage banking revenue

16,823

187

59

342

177

17,069

1,322

Commercial deposit and treasury management fees

9,345

7,106

7,144

6,545

6,327

23,595

18,322

Trust and asset management fees

5,712

5,405

5,207

4,975

4,799

16,324

14,167

Card fees

3,836

3,304

2,701

2,838

2,745

9,841

8,175

Capital markets and international banking service fees

1,472

1,360

978

841

972

3,810

2,719

Consumer and other deposit service fees

3,362

3,156

2,935

3,481

3,648

9,453

10,487

Brokerage fees

1,145

1,356

1,325

1,227

1,289

3,826

3,680

Loan service fees

1,069

916

965

1,214

1,427

2,950

4,349

Increase in cash surrender value of life insurance

855

834

827

848

851

2,516

2,537

Net (loss) gain on investment securities

(3,246

)

(87

)

317

(15

)

1

(3,016

)

14

Net (loss) gain on sale of assets

(7

)

(24

)

7

(323

)

—

(24

)

—

Gain on early extinguishment of debt

1,895

—

—

—

—

1,895

—

Other operating income

1,107

1,562

951

1,264

1,401

3,620

4,142

Total non-interest income

61,087

39,928

36,612

39,045

37,707

137,627

115,349

Non-interest expense:

Salaries and employee benefits

79,492

46,622

44,377

45,517

44,918

170,491

132,341

Occupancy and equipment expense

11,742

9,518

9,592

9,269

8,797

30,852

27,609

Computer services and telecommunication expense

11,506

5,079

5,084

5,509

4,870

21,669

13,374

Advertising and marketing expense

2,235

2,221

2,081

2,085

1,917

6,537

6,187

Professional and legal expense

8,864

1,567

1,779

3,057

3,102

12,210

5,750

Other intangible amortization expense

1,470

1,174

1,240

1,489

1,513

3,884

4,595

Net loss (gain) recognized on other real estate owned and other
expense

2,178

528

583

(459

)

1,031

3,289

(322

)

Other operating expenses

24,714

11,321

11,311

10,174

10,117

47,346

28,413

Total non-interest expense

142,201

78,030

76,047

76,641

76,265

296,278

217,947

Income before income taxes

11,389

31,920

26,743

33,667

33,654

70,052

104,279

Income tax expense

4,488

8,814

6,774

9,811

9,254

20,076

29,680

Net income

6,901

23,106

19,969

23,856

24,400

49,976

74,599

Dividends on preferred shares

2,000

—

—

—

—

2,000

—

Net income available to common stockholders

$

4,901

$

23,106

$

19,969

$

23,856

$

24,400

$

47,976

$

74,599

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Common share data:

Basic earnings per common share

$

0.08

$

0.42

$

0.37

$

0.44

$

0.45

$

0.83

$

1.37

Diluted earnings per common share

0.08

0.42

0.36

0.43

0.44

0.82

1.36

Weighted average common shares outstanding forbasic earnings
per common share

63,972,902

54,669,868

54,639,951

54,622,584

54,565,089

57,795,094

54,471,541

Weighted average common shares outstanding fordiluted
earnings per common share

64,457,978

55,200,054

55,265,188

55,237,160

55,130,653

58,341,927

54,912,352

Selected Financial Data:

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Performance Ratios:

Annualized return on average assets

0.22

%

0.97

%

0.86

%

0.99

%

1.05

%

0.64

%

1.07

%

Annualized operating return on average assets (1)

1.16

0.99

0.93

1.02

1.11

1.04

1.09

Annualized return on average common equity

1.21

6.86

6.07

7.19

7.46

4.47

7.72

Annualized operating return on average common equity(1)

8.29

6.98

6.53

7.43

7.95

7.34

7.88

Annualized cash return on average tangible common equity(2)

2.23

10.47

9.39

11.23

11.74

7.09

12.19

Annualized cash operating return on average tangible common equity(3)

13.19

10.66

10.08

11.59

12.48

11.42

12.44

Net interest rate spread

3.66

3.40

3.51

3.37

3.52

3.54

3.48

Cost of funds(4)

0.26

0.26

0.27

0.27

0.30

0.27

0.34

Efficiency ratio(5)

63.46

67.68

66.84

66.56

65.81

65.65

63.89

Annualized net non-interest expense to average assets(6)

1.35

1.55

1.58

1.50

1.56

1.48

1.43

Core non-interest income to revenues (7)

38.23

35.22

33.41

34.68

33.51

35.99

34.36

Net interest margin

3.56

3.26

3.36

3.23

3.37

3.41

3.34

Tax equivalent effect

0.22

0.27

0.28

0.27

0.29

0.25

0.28

Net interest margin - fully tax equivalent basis(8)

3.78

3.53

3.64

3.50

3.66

3.66

3.62

Loans to deposits

79.93

71.58

74.39

77.39

76.54

79.93

76.54

Asset Quality Ratios:

Non-performing loans(9) to total loans

1.12

%

1.99

%

2.13

%

1.87

%

1.83

%

1.12

%

1.83

%

Non-performing assets(9) to total assets

0.82

1.34

1.49

1.36

1.45

0.82

1.45

Allowance for loan losses to non-performing loans(9)

102.54

91.09

89.88

104.87

115.21

102.54

115.21

Allowance for loan losses to total loans

1.14

1.82

1.92

1.96

2.11

1.14

2.11

Net loan charge-offs to average loans (annualized)

0.04

0.18

0.45

0.23

0.18

0.21

0.14

Capital Ratios:

Tangible equity to tangible assets(10)

9.17

%

9.89

%

10.07

%

9.65

%

9.87

%

9.17

%

9.87

%

Tangible common equity to tangible assets(11)

8.33

9.89

10.07

9.65

9.87

8.33

9.87

Tangible common equity to risk weighted assets(12)

10.33

13.97

13.82

13.27

13.40

10.33

13.40

Book value per common share(13)

$

25.09

$

24.73

$

24.37

$

24.14

$

23.82

$

25.09

$

23.82

Less: goodwill and other intangible assets, net of benefit, per
common share

9.73

7.92

7.94

7.98

7.99

9.73

7.99

Tangible book value per common share(14)

$

15.36

$

16.81

$

16.43

$

16.16

$

15.83

$

15.36

$

15.83

Total capital (to risk-weighted assets)

13.58

%

17.18

%

17.09

%

16.53

%

16.70

%

13.58

%

16.70

%

Tier 1 capital (to risk-weighted assets)

12.62

15.92

15.84

15.28

15.44

12.62

15.44

Tier 1 capital (to average assets)

12.27

11.61

11.65

11.22

11.39

12.27

11.39

Tier 1 common capital (to risk-weighted assets)

9.90

13.71

13.59

13.07

13.17

9.90

13.17

(1)

Annualized operating return on average assets is computed by
dividing annualized operating earnings by average total assets.
Annualized operating return on average common equity is computed by
dividing annualized operating earnings by average common equity.
Operating earnings is defined as net income as reported less
non-core items, net of tax.

(2)

Net cash flow (net income available to common stockholders, plus
other intangibles amortization expense, net of tax benefit) divided
by average tangible equity (average common stockholders' equity less
average goodwill and average other intangibles, net of tax benefit).

(3)

Annualized cash operating return on average tangible common equity
is computed by dividing annualized cash operating earnings
(operating earnings plus other intangibles amortization expense, net
of tax benefit, less dividends on preferred shares) by average
tangible common equity. Operating earnings is defined as net income
as reported less non-core items, net of tax.

(4)

Equals total interest expense divided by the sum of average interest
bearing liabilities and noninterest bearing deposits.

(5)

Equals total non-interest expense excluding non-core items divided
by the sum of net interest income on a fully tax equivalent basis,
total non-interest income less non-core items, and tax equivalent
adjustment on the increase in cash surrender value of life insurance.

(6)

Equals total non-interest expense excluding non-core items less
total non-interest income excluding non-core items, and including
tax equivalent adjustment on the increase in cash surrender value of
life insurance divided by average assets.

(7)

Equals total non-interest income excluding non-core items and tax
equivalent adjustment on the increase in cash surrender value of
life insurance divided by the sum of net interest income on a fully
tax equivalent basis, total non-interest income less non-core items,
and tax equivalent adjustment on the increase in cash surrender
value of life insurance.

(8)

Represents net interest income on a fully tax equivalent basis
assuming a 35% tax rate, as a percentage of average interest earning
assets.

Equals total ending stockholders’ equity less goodwill and other
intangibles, net of tax benefit, divided by total assets less
goodwill and other intangibles, net of tax benefit.

(11)

Equals total ending stockholders’ equity less goodwill and other
intangibles, net of tax benefit, divided by total assets less
goodwill and other intangibles, net of tax benefit.

(12)

Equals total ending common stockholders’ equity less goodwill and
other intangibles, net of tax benefit, divided by total assets less
goodwill and other intangibles, net of tax benefit.

(13)

Equals total ending stockholders’ equity divided by common shares
outstanding.

(14)

Equals total ending stockholders’ equity less goodwill and other
intangibles, net of tax benefit, divided by common shares
outstanding.

NON-GAAP FINANCIAL INFORMATION

This press release contains certain financial information determined by
methods other than in accordance with accounting principles generally
accepted in the United States of America (GAAP). These measures include
operating earnings, core non-interest income, core non-interest income
to revenues (with non-core items excluded from both core non-interest
income and revenues), core non-interest expense, non-core non-interest
income and non-core non-interest expense, net interest income on a fully
tax equivalent basis, net interest margin on a fully tax equivalent
basis, efficiency ratio and the ratio of annualized net non-interest
expense to average assets with net gains and losses on investment
securities, net gains and losses on sale of other assets, gain on
extinguishment of debt and increase in market value of assets held in
trust for deferred compensation excluded from the non-interest income
components of these ratios, and contingent consideration expense, merger
related expenses, loss on low to moderate income real estate investment
and increase in market value of assets held in trust for deferred
compensation excluded from the non-interest expense components of these
ratios, with tax equivalent adjustment for tax-exempt interest income
and increase in cash surrender value of life insurance, as applicable;
ratios of tangible equity to tangible assets, tangible common equity to
risk-weighted assets and Tier 1 common capital to risk-weighted assets;
tangible book value per common share; and annualized cash return on
average tangible common equity. Our management uses these non-GAAP
measures, together with the related GAAP measures, in its analysis of
our performance and in making business decisions. Management also uses
these measures for peer comparisons.

Management believes that operating earnings, core and non-core
non-interest income and non-interest expense are useful in assessing our
core operating performance and in understanding the primary drivers of
our non-interest income and non-interest expense when comparing periods.

The tax equivalent adjustment to net interest income, net interest
margin, tax-exempt interest income and increase in cash surrender value
of life insurance recognizes the income tax savings when comparing
taxable and tax-exempt assets and assumes a 35% tax rate. Management
believes that it is a standard practice in the banking industry to
present net interest income and net interest margin on a fully tax
equivalent basis, and accordingly believes that providing these measures
may be useful for peer comparison purposes. For the same reasons,
management believes that the tax equivalent adjustments to tax-exempt
interest income and increase in cash surrender value of life insurance
are useful.

Management also believes that by excluding net gains and losses on
investment securities, net gains and losses on sale of other assets,
gain on extinguishment of debt and increase in market value of assets
held in trust for deferred compensation from the non-interest income
components, and excluding contingent consideration expense,
merger-related expenses, loss on low to moderate income real estate
investment and increase in market value of assets held in trust for
deferred compensation from the non-interest expense components, of the
efficiency ratio and the ratio of annualized net non-interest expense to
average assets, these ratios better reflect our core operating
performance, as the excluded items do not pertain to our core business
operations and their exclusion makes these ratios more meaningful when
comparing our operating results from period to period.

In addition, management believes that presenting the ratio of Tier 1
common equity to risk-weighted assets is useful for assessing our
capital strength and for peer comparison purposes. The other measures
exclude the acquisition-related goodwill and other intangible assets,
net of tax benefit, in determining tangible assets, tangible equity,
tangible common equity and average tangible common equity and exclude
other intangible amortization expense, net of tax benefit, in
determining net cash flow available to common stockholders. Management
believes the presentation of these other financial measures, excluding
the impact of such items, provides useful supplemental information that
is helpful in understanding our financial results, as they provide a
method to assess management’s success in utilizing our tangible capital,
as well as our capital strength. Management also believes that providing
measures that exclude balances of acquisition-related goodwill and other
intangible assets, which are subjective components of valuation,
facilitates the comparison of our performance with the performance of
our peers. In addition, management believes that these are standard
financial measures used in the banking industry to evaluate performance.

The non-GAAP disclosures contained herein should not be viewed as
substitutes for the results determined to be in accordance with GAAP,
nor are they necessarily comparable to non-GAAP performance measures
that may be presented by other companies.

A reconciliation of net interest margin on a fully tax equivalent basis
to net interest margin is contained in the tables under “Net Interest
Margin.” A reconciliation of tangible book value per common share to
book value per common share is contained in the “Selected Financial
Ratios” table. Reconciliations of core and non-core non-interest income
and non-interest expense to non-interest income and non-interest expense
are contained in the tables under “Results of Operations—Third Quarter
Results.”

The following table presents a reconciliation of tangible equity to
stockholders' equity (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Stockholders' equity - as reported

$

1,991,368

$

1,365,316

$

1,343,780

$

1,326,682

$

1,309,468

Less: goodwill

698,946

423,369

423,369

423,369

423,369

Less: other intangible assets, net of tax benefit

28,954

13,659

14,422

15,228

16,196

Tangible equity

$

1,263,468

$

928,288

$

905,989

$

888,085

$

869,903

The following table presents a reconciliation of tangible assets to
total assets (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Total assets - as reported

$

14,506,043

$

9,818,691

$

9,437,303

$

9,641,427

$

9,257,618

Less: goodwill

698,946

423,369

423,369

423,369

423,369

Less: other intangible assets, net of tax benefit

28,954

13,659

14,422

15,228

16,196

Tangible assets

$

13,778,143

$

9,381,663

$

8,999,512

$

9,202,830

$

8,818,053

The following table presents a reconciliation of tangible common equity
to common stockholders' equity (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Common stockholders' equity - as reported

$

1,876,088

$

1,365,316

$

1,343,780

$

1,326,682

$

1,309,468

Less: goodwill

698,946

423,369

423,369

423,369

423,369

Less: other intangible assets, net of tax benefit

28,954

13,659

14,422

15,228

16,196

Tangible common equity

$

1,148,188

$

928,288

$

905,989

$

888,085

$

869,903

The following table presents a reconciliation of average tangible equity
to average common stockholders’ equity (in thousands):

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Average common stockholders' equity - as reported

$

1,613,277

$

1,351,604

$

1,335,223

$

1,315,804

$

1,297,498

$

1,434,387

$

1,291,988

Less: average goodwill

550,581

423,369

423,369

423,369

423,369

466,239

423,369

Less: average other intangible assets, net of tax benefit

19,769

13,990

14,758

15,647

16,620

16,191

17,605

Average tangible common equity

$

1,042,927

$

914,245

$

897,096

$

876,788

$

857,509

$

951,957

$

851,014

The following table presents a reconciliation of net cash flow available
to common stockholders to net income available to common stockholders
(in thousands):

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Net income available to common stockholders - as reported

$

4,901

$

23,106

$

19,969

$

23,856

$

24,400

$

47,976

$

74,599

Add: other intangible amortization expense, net of tax benefit

956

763

806

968

983

2,525

2,987

Net cash flow available to common stockholders

$

5,857

$

23,869

$

20,775

$

24,824

$

25,383

$

50,501

$

77,586

The following table presents a reconciliation of net income to operating
earnings (in thousands):

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Net income - as reported

$

6,901

$

23,106

$

19,969

$

23,856

$

24,400

$

49,976

$

74,599

Less non-core items:

Net gain (loss) on investment securities

(3,246

)

(87

)

317

(15

)

1

(3,016

)

14

Net (loss) gain on sale of other assets

(7

)

(24

)

7

(323

)

—

(24

)

—

Gain on extinguishment of debt

1,895

—

—

—

—

1,895

—

Merger related expenses

(27,161

)

(488

)

(680

)

(724

)

(1,759

)

(28,329

)

(1,759

)

Loss on low-income housing investment

—

(96

)

(2,028

)

—

—

(2,124

)

—

Contingent consideration expense - Celtic acquisition

(10,600

)

—

—

—

—

(10,600

)

—

Total non-core items

(39,119

)

(695

)

(2,384

)

(1,062

)

(1,758

)

(42,198

)

(1,745

)

Income tax expense on non-core items

(10,295

)

(266

)

(855

)

(281

)

(174

)

(11,416

)

(168

)

Non-core items, net of tax

(28,824

)

(429

)

(1,529

)

(781

)

(1,584

)

(30,782

)

(1,577

)

Operating earnings

$

35,725

$

23,535

$

21,498

$

24,637

$

25,984

$

80,758

$

76,176

The following table presents a reconciliation of Tier 1 common capital
to Tier 1 capital (in thousands):

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

Tier 1 capital - as reported

$

1,402,796

$

1,058,504

$

1,038,600

$

1,022,512

$

1,002,883

Less: qualifying trust preferred securities

187,500

147,500

147,500

147,500

147,500

Less: preferred stock

115,280

—

—

—

—

Tier 1 common capital

$

1,100,016

$

911,004

$

891,100

$

875,012

$

855,383

Efficiency Ratio Calculation (Dollars in Thousands)

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Non-interest expense

$

142,201

$

78,030

$

76,047

$

76,641

$

76,265

$

296,278

$

217,947

Less merger related expenses

27,161

488

680

724

1,759

28,329

1,759

Less loss on low to moderate income real estate investment

—

96

2,028

—

—

2,124

—

Less contingent consideration expense

10,600

—

—

—

—

10,600

—

Less (decrease) increase in market value of assets held in trust for
deferred compensation

(38

)

400

152

588

459

514

963

Non-interest expense - as adjusted

$

104,478

$

77,046

$

73,187

$

75,329

$

74,047

$

254,711

$

215,225

Net interest income

$

95,612

$

68,072

$

67,328

$

68,263

$

68,908

$

231,012

$

204,073

Tax equivalent adjustment

6,087

5,677

5,581

5,655

5,905

17,345

17,054

Net interest income on a fully tax equivalent basis

101,699

73,749

72,909

73,918

74,813

248,357

221,127

Plus non-interest income

61,087

39,928

36,612

39,045

37,707

137,627

115,349

Plus tax equivalent adjustment on the increase in cash surrender
value of life insurance

460

449

445

457

458

1,355

1,366

Less net (loss) gain on investment securities

(3,246

)

(87

)

317

(15

)

1

(3,016

)

14

Less net (loss) gain on sale of other assets

(7

)

(24

)

7

(323

)

—

(24

)

—

Gain on extinguishment of debt

1,895

—

—

—

—

1,895

—

Less (decrease) increase in market value of assets held in trust for
deferred compensation

Core Non-interest Income to Revenues Ratio Calculation (Dollars
in Thousands)

Nine Months Ended

September 30,

3Q14

2Q14

1Q14

4Q13

3Q13

2014

2013

Non-interest income

$

61,087

$

39,928

$

36,612

$

39,045

$

37,707

$

137,627

$

115,349

Plus tax equivalent adjustment on the increase in cash surrender
value of life insurance

460

449

445

457

458

1,355

1,366

Less net (loss) gain on investment securities

(3,246

)

(87

)

317

(15

)

1

(3,016

)

14

Less net (loss) gain on sale of other assets

(7

)

(24

)

7

(323

)

—

(24

)

—

Gain on extinguishment of debt

1,895

—

—

—

—

1,895

—

Less (decrease) increase in market value of assets held in trust for
deferred compensation

(38

)

400

152

588

459

514

963

Non-interest income - as adjusted

$

62,943

$

40,088

$

36,581

$

39,252

$

37,705

$

139,613

$

115,738

Net interest income

$

95,612

$

68,072

$

67,328

$

68,263

$

68,908

$

231,012

$

204,073

Tax equivalent adjustment

6,087

5,677

5,581

5,655

5,905

17,345

17,054

Net interest income on a fully tax equivalent basis

101,699

73,749

72,909

73,918

74,813

248,357

221,127

Plus non-interest income

61,087

39,928

36,612

39,045

37,707

137,627

115,349

Plus tax equivalent adjustment on the increase in cash surrender
value of life insurance

460

449

445

457

458

1,355

1,366

Less net (loss) gain on investment securities

(3,246

)

(87

)

317

(15

)

1

(3,016

)

14

Less net (loss) gain on sale of other assets

(7

)

(24

)

7

(323

)

—

(24

)

—

Gain on extinguishment of debt

1,895

—

—

—

—

1,895

—

Less (decrease) increase in market value of assets held in trust for
deferred compensation

(38

)

400

152

588

459

514

963

Total revenue - as adjusted and on a fully tax equivalent basis

$

164,642

$

113,837

$

109,490

$

113,170

$

112,518

$

387,970

$

336,865

Total revenue - unadjusted

$

156,699

$

108,000

$

103,940

$

107,308

$

106,615

$

368,639

$

319,422

Core non-interest income to revenues ratio

38.23

%

35.22

%

33.41

%

34.68

%

33.51

%

35.99

%

34.36

%

Non-interest income to revenues ratio (without adjustments)

38.98

%

36.97

%

35.22

%

36.39

%

35.37

%

37.33

%

36.11

%

NET INTEREST MARGIN

The following table presents, for the periods indicated, the total
dollar amount of interest income from average interest earning assets
and the resultant yields, as well as the interest expense on average
interest bearing liabilities, and the resultant costs, expressed both in
dollars and rates (dollars in thousands):

3Q14

3Q13

2Q14

Average

Yield/

Average

Yield/

Average

Yield/

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Interest Earning Assets:

Loans held for sale

$

313,695

$

2,826

3.60

%

$

1,972

$

—

—

%

$

497

$

—

—

%

Loans (1) (2) (3):

Commercial related credits

Commercial

2,179,924

24,446

4.39

1,166,887

12,263

4.11

1,229,799

11,912

3.83

Commercial loans collateralized by assignment of lease payments

1,561,414

14,669

3.76

1,429,169

13,726

3.84

1,476,618

14,693

3.98

Real estate commercial

2,138,485

24,783

4.53

1,652,339

19,996

4.73

1,620,658

17,008

4.15

Real estate construction

183,535

2,820

6.01

128,115

1,324

4.04

133,557

1,274

3.77

Total commercial related credits

6,063,358

66,718

4.31

4,376,510

47,309

4.23

4,460,632

44,887

3.98

Other loans

Real estate residential

409,119

4,608

4.51

307,555

2,961

3.85

309,848

2,809

3.62

Home equity

252,250

2,556

4.02

277,122

2,993

4.28

252,891

2,678

4.25

Indirect

274,493

3,647

5.27

250,003

3,365

5.34

269,556

3,579

5.33

Consumer loans

68,186

774

4.50

61,950

599

3.84

65,437

725

4.44

Total other loans

1,004,048

11,585

4.58

896,630

9,918

4.39

897,732

9,791

4.37

Total loans, excluding covered loans

7,067,406

78,303

4.40

5,273,140

57,227

4.30

5,358,364

54,678

4.09

Covered loans

114,686

2,258

7.81

281,896

4,391

6.18

158,371

2,441

6.18

Total loans

7,182,092

80,561

4.45

5,555,036

61,618

4.40

5,516,735

57,119

4.15

Taxable investment securities

1,726,352

11,028

2.56

1,292,366

6,330

1.96

1,434,300

8,794

2.45

Investment securities exempt from federal income taxes (3)

1,087,340

13,908

5.12

946,396

12,577

5.32

966,518

12,748

5.28

Federal funds sold

15,460

14

0.38

6,793

7

0.40

4,359

4

0.36

Other interest earning deposits

341,758

211

0.24

316,210

193

0.24

448,173

277

0.25

Total interest earning assets

$

10,666,697

$

108,548

4.04

%

$

8,118,773

$

80,725

3.94

%

$

8,370,582

$

78,942

3.78

%

Non-interest earning assets

1,539,333

1,142,518

1,205,314

Total assets

$

12,206,030

$

9,261,291

$

9,575,896

Interest Bearing Liabilities:

Core funding:

Money market and NOW accounts

$

3,518,314

$

1,469

0.17

%

$

2,695,479

$

862

0.13

%

$

2,880,910

$

899

0.13

%

Savings accounts

906,630

128

0.06

844,647

137

0.06

868,694

97

0.04

Certificates of deposit

1,411,407

1,375

0.40

1,309,539

1,444

0.44

1,157,805

1,124

0.40

Customer repurchase agreements

210,543

102

0.19

205,946

113

0.22

184,178

95

0.21

Total core funding

6,046,894

3,074

0.20

5,055,611

2,556

0.20

5,091,587

2,215

0.17

Wholesale funding:

Brokered accounts (includes fee expense)

417,346

1,643

1.56

263,448

1,990

3.00

220,396

1,634

2.97

Other borrowings

632,163

2,132

1.32

215,041

1,366

2.49

236,292

1,344

2.25

Total wholesale funding

1,049,509

3,775

1.33

478,489

3,356

2.47

456,688

2,978

2.33

Total interest bearing liabilities

$

7,096,403

$

6,849

0.38

%

$

5,534,100

$

5,912

0.42

%

$

5,548,275

$

5,193

0.38

%

Non-interest bearing deposits

3,175,513

2,258,357

2,476,396

Other non-interest bearing liabilities

268,028

171,336

199,621

Stockholders' equity

1,666,086

1,297,498

1,351,604

Total liabilities and stockholders' equity

$

12,206,030

$

9,261,291

$

9,575,896

Net interest income/interest rate spread (4)

$

101,699

3.66

%

$

74,813

3.52

%

$

73,749

3.40

%

Taxable equivalent adjustment

6,087

5,905

5,677

Net interest income, as reported

$

95,612

$

68,908

$

68,072

Net interest margin (5)

3.56

%

3.37

%

3.26

%

Tax equivalent effect

0.22

%

0.29

%

0.27

%

Net interest margin on a fully tax equivalent basis (5)

3.78

%

3.66

%

3.53

%

(1)

Non-accrual loans are included in average loans.

(2)

Interest income includes amortization of deferred loan origination
fees and costs.

(3)

Non-taxable loan and investment income is presented on a fully tax
equivalent basis assuming a 35% tax rate.

(4)

Interest rate spread represents the difference between the average
yield on interest earning assets and the average cost of interest
bearing liabilities and is presented on a fully tax equivalent basis.

(5)

Net interest margin represents net interest income as a percentage
of average interest earning assets.

The following table presents, for the periods indicated, the total
dollar amount of interest income from average interest earning assets
and the resultant yields, as well as the interest expense on average
interest bearing liabilities, and the resultant costs, expressed both in
dollars and rates (dollars in thousands):

Nine Months Ended September 30,

2014

2013

Average

Yield/

Average

Yield/

Balance

Interest

Rate

Balance

Interest

Rate

Interest Earning Assets:

Loans held for sale

$

105,977

$

2,826

3.56

%

$

3,259

$

—

—

%

Loans (1) (2) (3):

Commercial related credits

Commercial

1,550,916

48,670

4.14

1,193,034

37,436

4.14

Commercial loans collateralized by assignment of lease payments

1,506,309

43,681

3.87

1,357,417

39,512

3.88

Real estate commercial

1,798,587

59,123

4.33

1,699,235

60,475

4.69

Real estate construction

152,827

5,372

4.64

125,184

3,714

3.91

Total commercial related credits

5,008,639

156,846

4.13

4,374,870

141,137

4.25

Other loans

Real estate residential

343,836

10,409

4.04

309,075

9,288

4.01

Home equity

256,101

7,946

4.15

287,198

9,259

4.31

Indirect

269,226

10,617

5.27

231,383

9,563

5.53

Consumer loans

65,433

2,175

4.44

67,608

1,830

3.62

Total other loans

934,596

31,147

4.46

895,264

29,940

4.47

Total loans, excluding covered loans

5,943,235

187,993

4.23

5,270,134

171,077

4.34

Covered loans

164,455

7,169

5.83

346,721

13,328

4.14

Total loans

6,107,690

195,162

4.27

5,616,855

184,405

4.39

Taxable investment securities

1,516,281

27,968

2.46

1,383,975

18,749

1.81

Investment securities exempt from federal income taxes (3)

997,128

39,066

5.22

930,653

37,537

5.38

Federal funds sold

8,605

23

0.37

3,249

9

0.37

Other interest earning deposits

326,226

601

0.25

232,529

420

0.24

Total interest earning assets

$

9,061,907

$

265,646

3.92

%

$

8,170,520

$

241,120

3.95

%

Non-interest earning assets

1,331,812

1,162,210

Total assets

$

10,393,719

$

9,332,730

Interest Bearing Liabilities:

Core funding:

Money market and NOW accounts

$

3,045,178

$

3,216

0.14

%

$

2,702,567

$

2,622

0.13

%

Savings accounts

879,336

334

0.05

835,754

409

0.07

Certificates of deposit

1,260,537

3,673

0.40

1,408,866

5,734

0.56

Customer repurchase agreements

195,136

293

0.20

191,789

312

0.22

Total core funding

5,380,187

7,516

0.19

5,138,976

9,077

0.23

Wholesale funding:

Brokered accounts (includes fee expense)

287,931

4,915

2.28

283,894

6,509

3.07

Other borrowings

368,220

4,858

1.74

230,021

4,407

2.53

Total wholesale funding

656,151

9,773

1.82

513,915

10,916

2.51

Total interest bearing liabilities

$

6,036,338

$

17,289

0.38

%

$

5,652,891

$

19,993

0.47

%

Non-interest bearing deposits

2,677,865

2,194,648

Other non-interest bearing liabilities

227,333

193,203

Stockholders' equity

1,452,183

1,291,988

Total liabilities and stockholders' equity

$

10,393,719

$

9,332,730

Net interest income/interest rate spread (4)

$

248,357

3.54

%

$

221,127

3.48

%

Taxable equivalent adjustment

17,345

17,054

Net interest income, as reported

$

231,012

$

204,073

Net interest margin (5)

3.41

%

3.34

%

Tax equivalent effect

0.25

%

0.28

%

Net interest margin on a fully tax equivalent basis (5)

3.66

%

3.62

%

(1)

Non-accrual loans are included in average loans.

(2)

Interest income includes amortization of deferred loan origination
fees and costs.

(3)

Non-taxable loan and investment income is presented on a fully tax
equivalent basis assuming a 35% tax rate.

(4)

Interest rate spread represents the difference between the average
yield on interest earning assets and the average cost of interest
bearing liabilities and is presented on a fully tax equivalent basis.

(5)

Net interest margin represents net interest income as a percentage
of average interest earning assets.

The table below reflects the impact the purchase accounting loan
discount accretion on Taylor Capital loans had on the loan yield and net
interest margin on a fully tax equivalent basis for the three and nine
months ended September 30, 2014:

Provision will be recognized on legacy Taylor Capital loans as they
renew and will largely offset the positive impact of the loan discount
accretion on non-purchase credit impaired loans. During the third
quarter of 2014, a provision of approximately $4.7 million was recorded
related to legacy Taylor Capital loans.